INSIDE HEALTH CARE.

Illinois' efforts at Medicaid reimbursement go begging

Illinois taxpayers pay more than $60 million in drug bills every year because of the way the Medicaid health insurance program for the poor tries to recoup money it is owed, according to a new report.

Millions of Medicaid beneficiaries have other drug coverage through private health plans, employers or worker's compensation programs. The Medicaid program, as the payer of last resort, shouldn't have to pay the bills of those covered by other insurance.

Yet the current Medicaid collection system, known as "pay and chase," is failing, according to the report by the federal Office of Inspector General. Here's what's wrong: Medicaid pays for the drugs first, but it falls down in its effort to collect, or "chase" reimbursement from private insurers.

The remaining 18 states couldn't even provide the office with the amount of money they paid and chased. The 32 states paid $440 million in pharmacy bills that insurers and others were supposed to pay and collected just $73 million, or 17 percent.

Since Medicaid programs are having difficulty controlling the rising costs of medical care, particularly prescription drugs, the inspector general's report shows there is a serious problem.

Illinois, for example, paid and chased $70.5 million in third-party pharmacy claims and collected only $9.3 million, or 13 percent, in 1999. That means Illinois was at risk for losing 87 percent, or $61.2 million, of the money its program tried to recover from insurers and others through the pay-and-chase approach.

While Illinois' loss rate is slightly worse than the national average of 83 percent, there were several states with worse records in 1999. Texas, New York, Ohio, Louisiana, Pennsylvania, Indiana, Kentucky, Arkansas and West Virginia lost 90 percent or more of the money they tried to recover.

But the inspector general's office believes states and the federal government, which jointly fund Medicaid, could stem the tide of lost revenue from unpaid drug bills.

The office recommended that the federal Department of Health and Human Services consider stopping states from using the pay-and-chase system.

The office also advised states to track what they pay and seek legislation to require that insurers and other third parties match their eligibility files with those of Medicaid.

"It is far better to go after these dollars up front than to get after them on the back side," said Mike Mangano, principal deputy inspector general in the Department of Health and Human Services.

Mangano said the inspector general's office recommends bolstering computer links between Medicaid programs and pharmacies so that information about other coverage a Medicaid patient may have, such as worker's compensation, or in an auto insurance policy, can be conveyed and billed quickly.

"There would be an upfront cost in developing the infrastructure and systems that you need," Mangano said. "But then the savings are available every year thereafter."